The risk of losses isn’t going anywhere, and will likely increase, according to a recent PwC report, “Broking 2020: Leading from the front in a new era of risk.” Protecting against a new breed of emerging risks will require coordination across corporations, insurance companies and policy makers. As the traditional intermediary in the risk transfer chain, brokers are positioned to identify and develop innovating solutions.
While brokers have some of the required capabilities and investments are underway to bridge this ever-widening gap, significant changes to operating models must be addressed in order to meet future demands. According to PwC, the question moving into the future remains: Can brokers respond quickly enough to keep pace with the rapid shifts in the marketplace and risk environment?
“Companies and their insurers have to keep pace with a global risk landscape that is evolving more rapidly now than at any time in recent history,” says Richard Mayock, global insurance broking leader with PwC (US).
According to the PwC survey, “Clients are essentially asking for three things: What risk can you help me to understand better, how can you help me to grow my business, and how can you help me transfer risk through traditional or capital market means at a price I can accept,” says Dominic Christian, executive chairman of Aon Benfield International. “There are few brokers who have the scale, licenses and analytical capabilities to answer all three of these questions.”
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Furthermore, many small brokerage firms may lack the scale to develop advanced capabilities in house, so it is important for them to find ways to pool resources or access market-wide information services. The survey reveals that risk analysis is the No. 1 way in which a brokerage firm, of any size, can assist clients on a more efficient basis.
Brokers have the ability to help their clients respond to these emerging and strategically critical risks, but on the flip side, failure to provide insightful advice could call relationships and capabilities into question. While there are great opportunities on which brokers could capitalize, they also come with large risks, should the broker fail to deliver. While two-thirds of risk managers who responded to the PwC survey see brokers as “trusted advisors,” reliance only on past relationships to carry the industry forward is not an effective strategy.
“Brokers are forced to move beyond their traditional role of facilitating basic risk placement decisions into providing creative and timely solutions that are anchored in deep analytical insights,” Mayock says. “Given the strategic nature of the demands now being placed on brokers, it is those that have a global presence that mirrors their clients’ footprints and invest in the necessary technology to strengthen their in-house analysis and solution development capabilities that will establish a sustainable competitive advantage.”
Overall, survey participants see service capabilities and the ability to complete the program as the most important capabilities, even more important than price, in choosing a broker. But brokers should also focus on developing strong relationships with their clients for the purpose of retention, and further, provide them with the knowledge clients require to successfully navigate the new risk landscape, driven by social, technological, economical, political and environmental forces.